Lack of funding rules delaying promised New Jersey offshore wind

On a blindingly sunny day in August of 2010, New Jersey Gov. Chris Christie signed the Offshore Wind Economic Development Act at Gloucester County's Paulsboro Marine Terminal. The law committed the state to requiring at least 1,100 megawatts of power to be bought from wind farms off the shore of New Jersey.

"I just think that it makes sense for us to go in this direction," Christie told gathered reporters. "Not only because it's good for or environment, but also because it's going to help us create jobs."

At the signing, New Jersey Department of Environmental Protection Commissioner Bob Martin called the legislation a milestone for not just the state, but the nation.

"This legislation will help pilot the first pilot project on the near shore of New Jersey within the next year," Martin said, laying out a timeline for the roll-out of offshore wind in the state. "It'll also drive the building of offshore wind 13 to 20 miles off the coast of New Jersey sometime in the next three to five years."

But not much has happened since.

Fast forward nearly three years to today, when lawmakers and industry are still trying to iron out the regulatory details of the law. There is no pilot project in the water. Eleven wind developers originally expressed some interest in leasing federal waters farther out to sea, between Barnegat Light and Avalon, but even projects already proposed are years away from being constructed.

"It's been slower than I think most of us had hoped for, for sure," said Erich Stephens, from the development company OffshoreMW. He said even planning for his company's proposed wind farm has ground to a stand-still.

The hold up? State regulators haven't decided yet how companies like his will get paid for the power they generate once projects are built.

"Without that payment mechanism, we're not going to be spending a lot of money to advance our project development plans," Stephens said.

Guaranteed energy buyer a boon for developers

The 2010 law committed a certain percentage of energy bought in New Jersey would come from offshore wind. Analyst Douglass Sims says singling out offshore wind was unprecedented.

"Back in 2010, New Jersey was the leader in all the states for offshore wind," Sims said.

Sims, who works for the Natural Resources Defense Council, said having a guaranteed, long-term buyer for wind power in place, even before farms are built, generated a lot of interest.

"If you are an offshore wind company and you can meet the state's qualifications you can be sure of getting 20 years of payments from New Jersey," Sims said. "And that means a lot of people are going to try to compete and get that 20 year stream of payments."

But, how, exactly, money will transfer from ratepayers to wind developers has not been decided yet. The lack of detail makes getting financing impossible, said OffshoreMW's Erich Stephens. He likens it to applying for a mortgage without key information.

"You're filling out the mortgage application and you can name the name of your employer, but you can't tell the bank yet how much you're getting paid or whether you get paid monthly or weekly or annually or whether you show up for work or not," Stephens said.

"You need the rules to get the investors to make the wind a reality."

At a press event at the Paulsboro Marine Terminal last August, two years after the offshore wind law was signed in the same location, head of the New Jersey Sierra Club Jeff Tittel blasted the Christie administration and the Board of Public Utilities, which is responsible for creating the energy certificate program.

"You need the rules to get the investors to make the wind a reality," Tittel said. "We're here to ask: Where are the jobs, where are the windmills?

Tittel and Senate President Steve Sweeney (D-Gloucester County) worry the regulatory delays will cost the state the manufacturing jobs the law was designed to create.

"We're losing our position as far as being able to capture this market, because the BPU is dragging their feet," Sweeney said.

Stefanie Brand, director of the New Jersey Division of Rate Council, said those who argue the process is taking too long don't understand how complicated it is.

"So far I do have to say New Jersey's statute has really worked in the way that it's intended," Brand said. "The goal was to make sure that this was done in a way that protects ratepayers, but also allows the industry to go forward, and yes it takes a while, but it is actually working as it was intended to work."

Offshore wind developers presented a proposal for an energy credit funding mechanism back in the summer of 2011. But under that model, money was routed through state coffers, so there were concerns that funds intended for offshore wind could be diverted into the general fund.

A consultant retained by the BPU released another plan in January that tried to fix that problem. Public comments on that plan are being accepted until May 1.

Federal delays contribute to pacing of projects

Meanwhile, lease applications for the federal waters off the coast of New Jersey haven't even been released yet, so Stefanie Brand argues it is premature to claim a lack of a funding mechanism is delaying off-shore wind development.

The NRDC's Douglass Sims said New Jersey is still the 'holy grail' for offshore wind companies.

"The perception of New Jersey as being a clear front-runner is just tarnished because the implementation hasn't been as quick or efficient as people had imagined or hoped," Sims said. "But New Jersey has this off-shore wind specific law which makes New Jersey really the best game in town to develop projects, even in 2013."

A decision is expected by June on whether a proposed pilot wind farm three miles off of Atlantic City will win state approval.

Developers say being the first to green-light larger projects is important because it could determine where manufacturing jobs materialize, and in which state international companies with expertise in wind energy will set up their American headquarters.

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